What lies beneath the unemployment numbers?

Unemployment is very low, but it is rising, and the underlying numbers tell a story

• Who is driving the increase in (low) unemployment?

• new-entrants and re-entrants v. job-losers

• is a second-wave on the way?

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What lies beneath low, but rising, unemployment?

Unemployment is still very low, but it has been rising.

That’s what happens when an extreme worker shortage normalizes to just a regular worker shortage, while the overall “job creation” picture stays pretty stagnant.

There is some interesting stuff beneath the surface numbers, though. Come on, see for yourself!

Higher income households driving the change

If you want to know who, specifically, has been driving the change in unemployment, it is unsurprisingly higher income workers

Parker Ross/Arch Capital

Higher-income households ($100k+) account for ~85% of the increase in unemployment relative to 2019.

Over a two-year period, i.e. from the peak of the pandemic labor shortage, the picture looks roughly the same, although the contribution of the highest earners is even more pronounced:

Again, the vast majority of the (still small) increase in unemployment is attributable to households with incomes $100K+.

It’s unsurprising that higher-income households are driving unemployment because it’s consistent with the White Collar Stagnation story.

Cheap capital was an incredible 15 year tailwind to the facilitators of capital, but when that tailwind came to an abrupt end, so passed the Age of Finance Bro (for now, at least). It can take a while, as long severances and casual job-searches provide some cushion, but you’d expect that higher-income unemployment would rise (and so it is).

To be absolutely clear, unemployment for higher income households is still very low.

But because ~half of household incomes are north of $100K, even small changes in unemployment to those households can drive bigger changes to the overall number.

That’s about ~50% of households reporting combined incomes $100K+¹

Is lower-income unemployment next?